In the last week before the election, housing has been a hot button topic with both parties announcing policies around the sector. The Reserve Bank of New Zealand has made a clear stance on LVR restrictions: don’t expect them to return anytime soon. Here’s what you need to know: LVR Restrictions won’t be returning any time soon – Reserve Bank In response to a question posed during a media briefing last week, The Reserve Bank of New Zealand stated that it would be counterproductive for it to try to rein in property investors while it’s doing everything it can to stimulate the economy.

The RBNZ on May 1 removed loan-to-value ratio (LVR) restrictions. These required banks to ensure most owner-occupier mortgagors had a 20% deposit, and most investors had a 30% deposit. The RBNZ said it would review its decision in a year’s time.

When asked if the bank would consider applying LVR restrictions to investor lending sooner, given the rapid growth in new (and higher-risk) lending to investors, senior RBNZ officials were quick to shut down the suggestion, stating, “At the moment we’re in a different type of economic environment… There’s a big economic contraction and we’re trying to create an environment – by lowering interest rates and making the funding freely available – so we can actually have an economic and financial recovery.”

The RBNZ has been lowering interest rates in a bid to ease debt servicing costs and encourage borrowing and spending to boost inflation and employment in line with its monetary policy mandate. If the last three months are anything to go by, the bank is seeing the desired results, with lending up, especially with first-time buyers, and returned confidence from investors. Lending to borrowers with deposits of less than 20% was up 32% in August 2020 compared to August 2019.

Housing a Key issue in the Lead up to the Election

With just under a week out from the election, housing has become a hot topic as parties attempt to sway voters through making claims and counter claims about their policies.

A graph from Interest.co.nz comparing housing consents under both terms of the major parties revealed that from September 2014 to August 2017, which approximately matches National’s last term in government, 86,291 new dwelling consents were issued. But over the following three years from September 2017 to August 2020, which approximately matches Labour’s term in government, 105,888 new dwelling consents were issued.

This data suggests that under the Labour Government, nearly 20,000 more homes (+23%) were consented than under the previous National-led government. This reveals that housing performance has been performing better under labour, but the graph trend does offer a counterargument that numbers were raising steadily from 2012 onward, suggesting that numbers may not have looked much different under a National government.

The Resource Management Act has also been a hot topic in the lead up to the election, with both Labour and National now proposing to replace the RMA with new legislation. All of the homes built during since the 2012 figures were under the much criticized RMA, so many will be watching closely to see how each party plans on moving forward with this.

-by Ravi Mehta from Professional Financial Solutions